What is the best revenue model for your online Marketplace? Part-Two

What is the best revenue model for your online Marketplace? Part-Two

Welcome back. In our last blog, we raved a lot about commission model. We discussed the core benefits of it. We also shed light on the strategies of the marketplace leaders and the viable options before emerging players.

Besides that, we request you not to write off other two revenue models. Why so? Let’s start with membership/subscription model-

The Membership/ Subscription Model:

Membership/subscription model is the best option for recurring revenue. Admin can tempt the vendors with the access of more assistance and better features with different membership plans. That’s not all. There are other perks-

Admin is not dependent on vendors’ performance:

Vendors know the worth of a good marketplace. They are always looking to sell their goods, showcase their services and stand out in the crowded e-commerce sector with a reliable platform. If there is a dip in their sales for a certain period of time, most of them will stay loyal to their existing marketplace, willfully paying admin their subscription fee (monthly, weekly etc).

Here, subscription model generates more revenue than the commission model. Commission model is entirely dependent upon each and every transaction. But, beware of the traps of recurring revenue. No vendors will be agreed to subscribe months after months if they do not get enough traction from that particular marketplace. They will look for a new platform to draw traffics to their products/services.

Subscription Model can limit vendor capabilities:

This is interesting.

Unlike commission model, the subscription model does not get benefited from each transaction. Without any strategic subscription plans for vendors, there are enough possibilities for them to consume all the profit pie. A well-thought out subscription can halt the free run without blocking their healthy business. Does that sound a puzzle?

The best solution is to give basic marketplace features to vendors, limit their capabilities with a lower subscription plan and lure them with costlier membership plan or subscription package for more advanced features.

How are the big players playing?

Ebay

Ebay is a good example of subscription model practitioner. Along with the commission model and listing fee, the marketplace giant Ebay has introduced the subscription fee for sellers.They have earned the confidence of their vendors to implement different subscription plans along with other revenue streams. Ebay is pretty clear in limiting or providing additional ben vendors’ role in their subscription model. Have a look-

A successful subscription model knows how to strike a balance. Amazon has exempted their subscribed sellers from flat fee.

When worked well, the subscription model can trigger benefits for a service-marketplace. Upwork has two subscription plans under the “Basic” and “Plus” categories offering additional features for both the agencies and freelancers. Closely look at the Upwork Plus plan which has categorically offered and limited certain features to both the freelancers and agencies.

Upwork Plus Membership Plan

Freelancers

Agencies

An additional 10 Connects per month (plus a prorated first month’s allotment).

The ability to support unlimited team members.

The ability to buy additional Connects as needed for $1 each.

An additional 20 Connects per month (plus a prorated first month’s allotment).

Rollover privileges so that up to 140 unused Connects can be carried over to the following billing cycle.

The ability to buy additional Connects as needed for $1 each.

Visibility into their competitors’ high, low, and average bids on jobs.

Rollover privileges so that up to 160 unused Connects can be carried over to the following billing cycle

The ability to create a customized URL to your freelancer profile.

Visibility into their competitors’ high, low, and average bids on jobs.

The ability to hide earnings on your freelancer profile.

The ability to create a customized URLs of your team members’ profiles

The ability to hide earnings on your agency and team members’ profiles

Lessons that we have learned

Subscription Model is always not the best option for product-marketplace:

Though it has a lucrative advantage for generating recurring revenue, subscription model is not a complete revenue system for product-marketplace. Amazon has Subscribe and Save service on selected products where the core of their business is run by the commission. You won’t see Amazon suddenly transition to a subscription-based company.

Figure out opportunities to tempt vendors:

Admin must provide additional features (inventory, delivery management) to lure the vendors for a higher subscription plan. Without adding real value to vendors’ cause, no subscription model can win sellers.

Service-marketplace is a better option for subscription model:

Peer-to-peer or customer-to-customer service-marketplace do not have concerns of providing product management and delivery service. They can lure the vendors through the better accessibility of the platforms. Just what Upwork does.

Challenges in setting up subscription model:

Provide different plans: So that vendor has convenient options to switch. Upwork has “Plus and Basic model.”
Ebay offers three different models.

Restrict the vendor capabilities: Each plan must have their own benefits and limitations. This is your best bet to tempt the sellers.

Flexibility to implement other revenue paths: Admin should have the option to stimulate revenue across a different path.

With WC Marketplace setting up a flexible membership/subscription plan is hassle-free and an automated process. Let’s explore the perks from the core-

Admin can create different membership plans: Being a robust solution, WC Marketplace offers pre set-up fields to the admins who can subsequently invite the vendors to choose among those customizable plans.

Admin can limit vendors’ capabilities with WC Marketplace: Admin gets numerous fields to assign responsibilities to vendors and limit their capabilities in their marketplace platform built by WC Marketplace.

Run Multiple Revenue Model Simultaneously: Running both the membership/subscription model along with the commission model is never a brainer with WC Marketplace. You just have to fill in the required checkbox.

The Final Call:

If you are a startup with a product marketplace venture, it’s better to start with commission over membership model in initial days or provide additional facilities (shipping, logistic management etc).

However, a well-optimized subscription model can be a real breakthrough for your service-marketplace as providing additional assistances here (Upwork model) would be more hassle-free.

Our efforts of helping you the riddle of marketplace revenue model do not end here. The last puzzle of “Listing Fee” is yet to be unwrapped. Will it be a trump card for your marketplace? The answer lies in our next blog.

One Comment

[…] The subscription model is also ideal in some cases because it’s nothing if not predictable. Suddenly your users know EXACTLY how much they have to pay for the services they need and YOUR income is not dependent on whether or not they perform. However, the subscription model can also sometimes limit vendor capabilities specifically BECAUSE it’s not dependent on getting value out of each transaction. This means that this is not always the best option for product-based marketplaces. Likewise, you’ll need to figure out what opportunities you can use to take advantage of to tempt vendors and truly let yourself stand out from the competition. […]